Mortgage Market Development in Turkey and Future Prospects

It is a fact that housing sector contributes directly and significantly to overall production activity in a country. Furthermore, it produces a Keynesian multiplier effect as a home purchase usually results in further spending in other sectors of the economy which creates other rounds of income and purchases. In the last decade, Turkish economy has experienced an annual growth of 4.3% on average, despite the crisis in 2008 and 2009, the private construction activities has also an average increase of 4.3% stabilizing the share of the private construction sector in GDP at 6-7% level. The positive developments in Turkish economy and financial markets have enabled banking system to provide mortgage loans with longer maturities, however, the limited access capability to longer term funding sources has created, and is expected to create further, maturity mismatch and funding deficit for Turkish banks. In this framework, a secondary capital market is required for the banks to create longer term funding sources. The analysis made on the secondary mortgage market models of US and Europe reveals the fact that there should be a governing agency wholly or partly operated by public sector. In such a framework, in Turkey, it is proposed that Public Housing Administration (TOKI) can be furnished with required capabilities and legal entitlements in order to serve as the housing finance agency of Turkey.